The Encroachment Trap: A Growing Risk for Commercial and Residential Landlords

Most people are aware of the concept of ‘squatters’ rights’ which is properly known as ‘adverse possession’. This is where a person claims a right to be the registered owner of a property they have occupied for more than 10 years without the current registered owner objecting (or 12 years for unregistered land).

However, many people do not realise that a similar situation can arise in relation to leasehold property if the leaseholder takes possession of property not demised or included in their lease. For example, if someone was leasing a piece of land and began using an adjacent piece of land belonging to their landlord but not included in their lease, this is known as “encroachment”.

The recent First-tier Tribunal decision in McGee & McGee v Long Term Reversions (Harrogate) Limited has exposed a serious area of risk for landlords, freeholders and managing agents that are aware of leaseholders encroaching on land retained by the landlord.

In this article, we cover what leasehold encroachment is, how this relates to the law of adverse possession, the risks to landlords and their managing agents, and how our property litigation experts can help.

Are you a landlord or managing agent looking for advice on encroachment or help to resolve a dispute? Please contact Hayley Grantham who will be happy to advise.

Does adverse possession apply to leasehold encroachment?

The case of McGee & McGee v Long Term Reversions (Harrogate) Limited (2023/0552) came before the First-tier Tribunal following a dispute between the long-term occupants of a residential property under a long lease. The residents, Mr and Mrs McGee, had made use of a loft space in the property that was not included in their lease. Eventually, the McGees applied to extend the lease to cover the loft space which the landlord did not wish to allow.

The Tribunal determined that this leasehold encroachment did not fall under adverse possession rules. Instead, the Tribunal decided that this encroachment was covered by the principle of estoppel. In this context, estoppel, prevents a tenant denying their landlord’s title to land and displacing their ownership of the land.   The Tribunal found that the occupation of the loft was consistent with an extension of their tenancy.

Given that this is a decision of the First-tier Tribunal, it is important to note that it is not legally binding on other courts. That said, it does establish a meaningful precedent for such cases of which landlords and their agents should be aware.

What do landlords and managing agents need to do about the risk of leasehold encroachment?

Anyone involved in managing leasehold property should carefully review their portfolios and make sure they identify any areas where they believe there is a risk of leaseholders encroaching onto areas not included in the lease such as balconies, loft space or outdoor space. Property boundaries should be clearly set out in the lease, regular inspections carried out by the landlord or their agents and any relevant communications should be properly documented to interrupt any potential claim for encroachment.

Where it is found that a leaseholder has encroached on property not included in their lease or they have requested to expand the scope of their lease, a decision will need to be made about what the most commercially viable option is. In many cases, it may make sense to agree to modify the lease terms in exchange for a premium and the leaseholder covering the landlord’s legal costs. If prompt action is not taken, the leaseholder may increase demise without the need to pay a premium to the landlord.

How Longmores can help landlords and managing agents with leasehold encroachment

At Longmores, we regularly advise commercial and residential landlords, freeholders and managing agents on a wide range of property law matters including encroachment. We can review existing leases  to advise on the risks and suggest practical measures to avoid expensive litigation.

For expert advice on encroachment or help resolving a dispute, please contact Hayley Grantham who will be happy to advise.

Please note, the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.